In the upstream oil and gas industry, success often relies on how well projects are run. As exploration moves to completion and production, each well, rig or horizontal drilling pad project’s on-time completion and installation are no longer enough. Data must also be smoothly transferred from the asset’s designed state to its installed reality. The same holds true for supporting equipment—such as pumps, diesel engines and mud separators. To accelerate projects, information should not be fragmented into niche systems. A more integrated approach should be considered that blends project management, enterprise resources planning (ERP) and enterprise asset management (EAM) into one cohesive collection. The steep growth curve in the oil and gas industry has brought increased pressure to excel at project and asset management. According to the International Energy Agency, advances in extracting oil from shale rock and other unconventional resources drove a 39 percent jump in U.S. production since 2011 and will boost output to a 28-year high in 2014. The number of workers involved has also grown. According to the U.S. Energy Information Administration, U.S. oil and gas industry employment increased 40 percent between 2007 and the end of 2012, compared to only a 1 percent increase across all sectors. Meanwhile, capital projects in the industry have grown larger and more complex. According to research from Deloitte and FactSet, the number of global oil and gas companies with capital budgets exceeding $1 billion more than tripled from just 40 in 2000 to 132 in 2012. Those with capital expenditures exceeding $5 billion increased fivefold, from seven in 2000 to 35 in 2012. In short, the industry faces skyrocketing production, more complex projects, and subcontractors and distinct labor forces to coordinate. These factors add up to the need for integrated, cross-functional systems.
The Separate Systems
In the past, a mix of systems has been used—from ERP to handle core business functions, such as accounting and procurement, to niche systems for project management and computerized maintenance management systems (CMMSs) and EAM systems to handle asset repair and maintenance. Each solution offers strengths to project management processes:
- EAM and CMMS—Earlier generation maintenance systems or CMMSs mainly executed maintenance operations, including scheduling tasks and dispatching work orders. Some CMMSs could procure maintenance, repair and overhaul (MRO) supplies, but in other cases, procurement was handled with an ERP system. With an EAM system, maintenance management is more enterprise-wide, includes MRO procurement functions and more analytics, and holds master data about the service history of each asset through its entire life cycle.
- Project management and scheduling—This class of solutions manages the progress of each project. It allows operators to track milestones, manage the people and skills assigned to each project, and coordinate the activities of subcontractors.
- ERP systems—These systems bring together core business management functions such as accounting, order management, inventory control, procurement and production management within one common software suite. Some ERP solutions have integrated EAM and project management applications. Many ERP solutions were initially tailored for discrete manufacturers, but some ERP vendors have evolved their offerings for project-oriented and asset-intensive industries.
Typically, at least some of the data related to the assets in major capital projects start as drawings and specifications within a software package used by an architecture, engineering and construction (AEC) firm. Once a major asset enters operation, however, some of this data should be passed to an EAM solution used by the owner/operator. This is the first major handoff point in the asset’s life cycle. Once in operation, equipment also requires maintenance. EAM systems are often used to manage an accurate as-installed and as-serviced history for each piece of equipment. For capital projects to proceed smoothly and assets to operate as designed for long periods of time, the as-serviced history must be up-to-date and easily accessible by personnel—the owner/operator performing maintenance, an original equipment manufacturer or an engineer troubleshooting a performance issue—who need use it. Each equipment asset can be viewed as a project that involves the participation of multiple players—one that does not end until the asset is retired.
While each major software solution type can perform its own domain functions adequately, excellence in project and asset management relies on the timely, free flow of information. Batch integration mechanisms or infrequent rollups of data from one system to another create visibility gaps. For example, accurate insight into the cost progression of a project benefits from real-time data integration. If the time dedicated to a capital project by subcontractors or engineers is recorded only in a spreadsheet or a desktop project management tool, analyzing the true cost of the project is difficult. Visibility into cost progression requires merging the resources expended on a project with budgetary, human resources, and reporting data and tools that often reside at the ERP level. Likewise, an enterprise cannot obtain the true cost of servicing a pump, separator or other asset if that information is only tracked in a CMMS. For instance, during years of operation on a rig, maintenance engineers might have upsized a few pumps to remedy performance issues. The data on the new pumps may not be fully integrated with engineering and ERP systems. If a major overhaul of the rig is implemented and an outside consulting engineer does not have access to the newer pumps’ data, the wrong pump specifications may be used. To excel at project and asset management, these gaps must be filled. A free flow of information is needed between systems and between project participants during the design, operation and upgrade of key assets.
Integrated Foundation as a Solution
An integrated approach to ERP, EAM, and project management information and processes is the best way to fill these gaps. Some system vendors have merged the application functions under a common software platform. Even if a single platform is not available, enough data should be passed between the systems to support visibility, traceability, and financial management and control. Not every detailed piece of data collected in an EAM system must be accessible to an ERP. However, any information that impacts the flow of costs and benefits—such as time engaged in maintenance, the cost of service parts, or the demand for skilled labor or contractor costs—should flow back into decision support systems at the enterprise level. Rather than resorting to data integration efforts and middleware to support the information flow, companies may opt for an ERP solution that incorporates asset, logistics, contract, project and financial management. Integrated project and contract management within an ERP system can be especially important to drilling contractors, who work closely with engineering, procurement and construction (EPC) firms, equipment manufacturers, control engineering firms, and electrical and mechanical contractors. The ability to coordinate the activities of these participants is becoming a requirement in the industry. Beyond tactical scheduling, drilling contractors require an integrated foundation for keeping track of performance, cost, cash, time and risk. This integration is even more critical for offshore operations because of their remote locations, lack of spare parts storage capacity and the high cost of downtime. To be highly effective, drilling contractors and owner/operators in the upstream oil and gas industry need an integrated enterprise system that focuses on tracking project and asset management information at the enterprise level.